Inside One of the U.S.'s Biggest-Ever Investment-Fraud Stings

Executives from over a dozen microcap companies -- also known as "penny stock" companies -- allegedly accepted a corrupt bargain offered to them in an FBI sting operation. WSJ's Jason Bellini diagrams how "Operation Pennypincher" worked.

The cramped office tucked behind an auto-parts supplier in a Boston suburb was an unlikely setting for a hedge-fund manager with a $3 billion New York firm.

But John Kelly, a middle-aged man partial to pleated navy slacks and a pink button-down shirt, made clear to visitors that he had good reason for operating his firm, SeaFin Capital, far from the prying eyes of his Wall Street bosses: He was running a scam and looking for willing...